Once you have saved up most of the money for a mortgage, it’s time to get prepared for a mortgage application. As someone entirely new to first time buyer mortgages, you may be wondering how exactly that will work.
Here are some handy hints and tips in terms of what documents you might be asked to produce and why.
Obtaining an up-to-date credit report should be right at the top of your list, ideally even before you engage a mortgage broker.
You don’t want a point of principle argument with your mobile phone provider holding you back from buying a home for the sake of £50 – just get it paid!
Your mortgage advisor will take a look at the report prior to selecting the right Lender for you. You want to get this right first time and so do we and having this data will help massively. Being on the voter’s roll really seems to help in terms of your credit score, as does closing down credit cards no longer in use.
In terms of proving who you are you’ll need to produce some photo ID. Most customers use a Driving licence or passport for this element.
You can’t use Driving Licence for ID though if you are also using it for proof of address. If you are a non-UK national working over here on a Visa, you’ll need to produce that too.
In addition to the proof of identification, you’ll need to prove where you live. You’ll need to produce a utility bill or original bank statement dated within the last 3 months or potentially your Driving Licence if you are using your Passport as ID.
Your bank statements should evidence your income and regular expenditures. Lenders will not be happy to see gambling transactions on your account and nor will they like it if you go over an agreed overdraft limit or if your direct debits bounce regularly.
This is all about getting prepared. Not all Lenders ask to see your Bank Statements but those that do will want to be confident you are the type of person who takes their finances seriously.
The Bank Statements you need to produce tend to be the ones where your salary goes in and your bills go out.
You will have to prove you have the funds in place for the deposit and evidence this for anti-money laundering purposes. I always think it’s best not to move monies around your various accounts too much.
If you do, it will make evidencing the audit trail more difficult. Lenders like to see your savings building up, so you’ll need to account for any large recent credits into your accounts.
These days, money for deposits has often been gifted by family members. These funds need to be evidenced also and the “donor” will need to sign a letter to confirm it’s a non-refundable gift (not a loan).
In terms of affordability, the most important thing is to be able to prove your income. If you are employed this tends to be by way of your last 3 months’ payslips and some Lenders also want your most recent P60.
Lenders can consider regular overtime, commission, shift allowance and bonus. Some Lenders will accept earnings from more than one Employer (for example if you have a part-time job or self-employed “side hustle”).
Many applicants these days are self-employed and taking out self-employed mortgages. If this is you then you’ll need your Accountants’ help to request your last 2- or 3-years’ proof of earnings from the revenue.
If you submit your own accounts, please contact us and we will advise you what to download from the Government Gateway.
It’s a good idea to do your homework and write down an estimate of your anticipated outgoings after you move to a new house.
You can work out an idea of how much the council tax and utility bills will be plus your regular expenditures such as food and drink and demonstrate how much disposable income you have available to pay your mortgage from.
Before we carry out an appointment with you we can send you our version of a Budget Planner to help you with this.
As you can see from the above, preparing for a mortgage isn’t easy. Think of it like the “Tortoise and the Hare” – if you want your application to run like clockwork, you’ll need to put the time aside to get everything together.
You’ll get there much quicker if you put in the work at the outset!